For years, Canada’s resource and energy sectors have been gripped by a crisis of reinvention as they try to figure out a suitable and competitive future. With the arrival of the pandemic, this lack of true north was further cemented, accelerating discussions around the sectors’ long-term viability.

Having contributed for decades to the country’s growth and prosperity, Canada’s bitumen is at a crossroads; it needs to evolve beyond its current use. Alberta’s massive reserves have long been used for bitumen’s lowest-value application: combustion fuels. Dense and sticky, bitumen is more difficult to process and transport than lighter oils, making it more costly. Conversely, the chemistry, composition and viscosity of bitumen make it an ideal feedstock for high-value carbon fibre materials that are strong, light and durable. These materials are key inputs for more sustainable vehicles, industrial equipment, buildings and infrastructure. Research on further uses for bitumen is still emerging, but its potential to be converted directly into other applications is very real as we look to support supply chains that are sustainable and poised for growth in the advanced materials space.

For several years now, Alberta Innovates has been driving the Bitumen Beyond Combustion (BBC) program to achieve two priorities: fund programs that lower greenhouse gas (GHG) emissions associated with oil-sands production and increase the investment value of the province’s bitumen industry. This work has yielded some promising market segments: asphalt binder, activated carbon and carbon fibre have the potential to generate a total of $84 billion annually, more than three times the $27-billion annual value of bitumen for combustion fuel – and much more sustainable for the planet.

Interestingly, BP’s Energy Outlook 2020 projects oil production of 24 million barrels per day in its net-zero 2050 scenario. It allocates 1.5 million barrels of oil per day, or the equivalent of 87 million tonnes, to asphalt in 2050. Even by conservative measures, with zero market increase after 2030, global asphalt demand would be 220 million tonnes per year by 2050. This means there could be a global asphalt shortage of up to 133 million tonnes per year in the 2050 net-zero scenario. Because Alberta bitumen contains up to 50% asphalt binder, more than any other crude oils, it would take only 7.6 million barrels of bitumen per day to satisfy the global asphalt market. With 50% of Alberta’s bitumen used for asphalt, that would still leave 50% of the distillate for use in other downstream applications. Light and medium crudes cannot satisfy the asphalt demand in the net-zero 2050 scenario. There is already strong innovation taking place that allows bitumen to be used to make asphalt more sustainably. As an example, BASF has recently launched a liquid asphalt modifier that’s designed to reduce energy, resource consumption and the need for chemical cleaning agents by paving trucks. It lowers emissions of volatile organic compounds during paving operations and enables fewer roller passes for compaction, thereby increasing efficiency and reducing the total cost of ownership.

Unlike conventional and shale oil used to make asphalt, 80% of emissions in bitumen production are from natural gas combustion, making carbon capture and storage (CCS) viable. CCS has the potential to reduce GHG emissions by 60 megatonnes (MT) annually in existing oil-sands production facilities, once CCS costs come down (one Alberta CCS project has stored more than 5 MT of CO2 to date). Also, technologies are being developed to increase the amount of asphalt that can be recycled. And as solidification technology advances, it will become possible to transport bitumen in pellets rather than in a molten state, which would lower delivery costs and emissions.

Canada has tremendous potential to deliver a global blueprint for marrying vast resource and energy sectors with sustainable low-emission targets and zero-waste ambitions. It’s time for Canada to shed its identity crisis and embrace its leadership position as a resource-rich country with much to offer the world. This can all be done sustainably, just like the further development of bitumen beyond combustion.

The road ahead is clear for Canada – we just need to start paving it.

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The recent cabinet shuffle in Ottawa has placed an intensifying focus on a green and caring recovery, one that will likely tie stimulus support and investment to corporations meeting climate goals and contributing to society. This will be a bold move. If there is a time to do it, it’s now. But how can we objectively measure and monitor what companies are doing and give them the incentive to move in the right direction?

For almost 60 years, the core of accounting principles has remained unchanged. Basically, it captures the revenues and costs of a company’s direct economic activity. It does little to account for, in monetary terms, the company’s societal and environmental value contributions and impacts, namely jobs created, wages paid, climate impact, water usage, et cetera. 

At this point, companies disclose these components differently, with varying measures, focus and metrics. To capture the “true” value contribution of business to society, environment and the general economy, this needs to change. Corporate impacts need to be measured and valued using standardized methodologies. Putting a dollar value on impacts on water, air, workers and more (both positive and negative) and stating it in a financial report, would unlock billions in potential sustainable investment. Most importantly, it will make accounting for environmental and societal impacts part of the fiduciary duty of companies’ boards of directors – thereby rewarding measured decision-making, bold actions and accountability.

BASF recently became a founding member of the Value Balancing Alliance (VBA), a non-profit organization whose goal is to change the way company performance is measured and valued. Under the directive of the European Commission, the VBA has been mandated to draft a new set of green accounting principles to support the implementation of the EU Green Deal. More specifically, it will standardize a common method to assess the value a company brings to society, provide a framework for comparability within sectors, enable scalability of adoption, and incentivize a “triangular” approach to business steering and decision making. 

With the convergence of these new management accounting principles, companies will be driven to define and measure their often otherwise abstract statements of purpose and disclose progress on them. These principles will also benefit companies that have had difficulty communicating their positive impact under current financial reporting. This includes energy companies in Canada that are among some of the most innovative and heavily invested in communities and, surprisingly to some, the environment. These new standards will help lure a new generation of investors who will reward companies for considering their total value and impact on society, the environment and the economy, rather than just their profits. 

While many believed that climate change and ESG (environmental, social and governance) metrics would be dismissed during the pandemic-induced downturn, a large number of companies have doubled down on their commitments. COVID-19 has reminded the public and investors what it means to be a company for the good of society. That means protecting and ensuring the safety and jobs of employees, meeting tax responsibilities and responding to crisis with actions, not words, and having purposeful strategies that can weather societal, environmental and business uncertainties.

What’s also clear is that companies that have successfully tied their mission statements to the 2030 UN Sustainable Development Goals agenda have a lot to gain with the transparency that will emerge out of a triangular-shaped recovery.

In the wake of the pandemic, a major reset is coming to all businesses. We need a formal departure from the old ways of accounting. We need companies to work closely with the federal government and international standard setters to align on a new reporting standard that shows a company’s real total contribution to society. Europe has a model that’s worth considering. We should embrace this time of change to leapfrog beyond old norms and adapt quickly to the new challenges we face ahead. It’s time to put numbers where numbers are due, weighing impacts on society and the environment at par with a company’s bottom line. 

The new finance minister may be surprised by how open businesses are to making this change. If it is done in a collaborative way, we may truly see a seismic shift in reporting and decision making that puts Canadian businesses back in the global lead.

Marcelo Lu is president of BASF Canada.

Christian Heller is CEO of Value Balancing Alliance.

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Beyond the obvious benefits for business and employment, well-calibrated green recovery investments in energy efficiency and electrification of mobility would make our homes and workplaces more comfortable and cheaper to run, while getting around would be a lot cheaper and cleaner, saving the average participating household $1,414 per year on home heating and power costs (which will be partially offset by capital costs) and a net $1,917 per year on fuel costs for their vehicles^.

An “Own the Podium” strategy for Canadian companies is a potentially powerful engine–powered by sustainable biofuels, of course–for wealth creation. But for it to work, it must leverage our inherent economic strengths and how they line up with where people spend money.

This is similar to what we already did with the Olympics: identifying where we have the best chance of winning medals and taking account of the value of different medals.

With summer at the doorstep, most of us are not thinking about winter right now, but it is the Winter Olympic Games where we excel, ranking third in the world for all-time medals versus 20th for the Summer Olympics. Given our long winters, tall mountains and frozen bodies of water, it’s no surprise that three of the four areas where Canada leads the world in medals in the modern Olympics are ice hockey, freestyle skiing and curling – all sports that combine the majesty of Canada’s natural environment with the traditional talents of our people. (The fourth sport, in case you were wondering, is lacrosse, which builds on the traditions of our Indigenous peoples.)

What are Canada’s special economic advantages? As Navdeep Bains, Minister of Innovation, Science, and Economic Development, is fond of saying, it’s our abundant nature and people.

And if we look at what people spend money on, the top four annual expenditures for Canadian households are shelter, transport, food and energy, according to analysis by Ralph Torrie, a senior associate with Sustainability Solutions Group and partner at Torrie Smith Associates. We happen to have almost unparallelled assets in each of these areas.

Who knew Canada is the world’s largest commercial landlord*, home to 12 of the top 40 real estate investors in the world? The real estate assets of Canada’s largest real estate investors total $493 billion, with Brookfield Asset Management alone representing $202 billion in more than 30 countries.

We’re also the fifth largest exporter of cars in the world by value, and among the top five producers of important minerals for rapidly expanding battery markets, including nickel, cobalt and graphite (and soon lithium from Alberta’s oilfield brines will be added to that list with companies like E3 Metals leading the way). According to BASF Canada president Marcelo Lu, “Canada is one of the few countries that has all the elements to produce a lithium-ion battery for electric vehicles.” We are also the global hub for mining finance, with the TSX being the world’s number one mining and exploration listing venue.

Canada is the world’s fifth largest agricultural exporter thanks largely to wheat and canola, but we’re rapidly becoming a plant-protein powerhouse. We rank number one in pulse exports (fuelling a growing global appetite for pea protein), and our own Maple Leaf Foods is one of the largest plant-based meat players in the world.

We are the fourth largest oil producer, and we have the largest natural bitumen deposit in the world, which have uniquely high concentrations of asphaltene, a potentially lucrative feedstock for lightweight materials. Instead of extracting oil from the bitumen to burn in tailpipes, we could harvest materials that are more valuable than oil, including carbon fibres, which would be the material of choice in construction and for making electric cars and trains if we can crack the cost nut.

And as a nation that generates more renewable power than any country outside of China, we could be a supplier of choice for the growing green hydrogen market, which could be a trillion-dollar industry by 2030.

What will determine who wins in these goliath markets?

They are all in a state of flux, with the common denominator being rapid decarbonization, since low-carbon processes are now money-savers and will help secure access to large markets, including Europe, which is throwing up trade barriers for countries that don’t meet climate standards.

Electric vehicles (EVs) already save people so much money on fuel that many EVs have a lower total cost of ownership than their polluting cousins. Smart buildings have lower energy bills and happier tennants, which is why property technology is exploding, with many Canadian players, including the members of the Building Energy Innovators Council, leading the way. (Exporting this know-how via our $493-billion real estate investment portfolios offers the chance to earn higher returns for Canadian investors, while vastly reducing greenhouse gas emissions on a global scale). Farmers who have shifted from expensive nitrogen inputs to regenerative farming methods are being rewarded with lower costs and new contracts with major companies like General Mills.

Investment in renewable energy capacity hit US$272.9 billion in 2018, about triple the investment in coal- and gas-fired generation capacity combined, and green energy with storage is now on par with or cheaper than fossil energy in most countries.

The oil and gas sector is also reeling after the COVID-19 crisis drove prices into negative terrain  in April for the first time in history. Last week, Mark Little, the CEO of Suncor, warned that EVs could disrupt future oil demand as much as the coronavirus has. He also noted that “now is the time to take a big step forward” to tap into low-carbon growth opportunities, including renewable jet fuels, hydrogen and carbon fibres, which have the potential to quadruple oil sands revenues. Little followed up these words a couple of days later with a $15 million initial investment in LanzaJet, a new U.S.-based company that aims to commercialize the production of sustainable jet fuel to help the aviation sector meet its climate targets.

If we want to Own the Podium in the fast-growing markets for smart buildings, EVs (and their batteries), sustainably produced food, green energy and advanced materials, there are three things the federal government can do:

1. Use a jobs-rich $106 billion green recovery to buy or move forward good policy in cities and provinces to create domestic markets to scale up production for these high-growth, low-carbon markets. That amount is a big carrot, and with the bulk of the money targeted to flow in the next two years, there would be powerful incentive for provinces and municipalities to fulfill the conditions in order to ensure access to these funds. As the centrepiece of the economic recovery in the short-term, we can attach strings to funds for an ambitious green renovation wave to upgrade our homes and workplaces to ensure provinces and municipalities commit to upgrading building codes by 2022 for net-zero buildings (including embodied carbon) and to remove barriers for affordable housing by implementing the Declaration for Resilience in Canadian Cities. We can do the same for the power sector by tying stimulus funds for the power system to ensuring fair grid access for renewables. At the federal level, it is time to send a signal to markets that Canada wants to be a serious player as a manufacturer of the next generation of zero-emissions vehicles (ZEVs), by introducing a 100% ZEV mandate to be phased in by 2030, leveraging the purchasing power of Canada’s $85 billion annual market for new vehicle sales. We can also support farmers to enrich their soil and improve their bottom lines by paying them for verified carbon credits.
2. Dedicate $5 billion in research and development and piloting over the next five years to fund technological breakthroughs in bitumen-based carbon fibres, green hydrogen, renewable jet fuels and batteries. This would take a page from former Alberta Premier Peter Lougheed, who invested $1.4 billion almost 50 years ago to figure out how to affordably extract oil from bitumen, which unlocked an economic bonanza from Alberta’s oil sands.
3. Attract major investment from around the world by topping up the current federal Strategic Investment Fund’s $1.6 billion budget over five years to $40 billion, and refreshing its mandate to tackle low-carbon, high-growth markets where Canada can play to win. (It should be noted that for almost any large project in Canada to go forward, these investments will need to include meaningful partnership with Indigenous communities.)

We could easily pay for all this by issuing green bonds backed by our AAA credit rating. Or by closing just a few of the 171 tax loopholes that deliver debatable public benefit at a large perpetual cost. Or by cracking down on large corporation tax avoidance, which runs over $10 billion per year.

If we act to Own the Podium in these tangible markets it would also be a shot in the arm for Canada’s financial services and technology sectors, Toronto Finance International estimates there’s potential to grow annual revenues in low-carbon banking, insurance and investment by $110 billion in the next five years.

And let’s not forget Shopify. Our natural assets and strengths in the tangible economy can produce spin-off benefits and innovations for the services economy. If we didn’t have snowy mountains, there wouldn’t be much of a market for snowboard, and maybe no Shopify, which was born as an online snowboard shop and now powers more than a million e-commerce storefronts from all over the world.

The games are on.

If we want to be at the podium as suppliers rather than buyers in these rich, growing markets, now is the time to be bold.

Toby Heaps is the editor-in-chief and co-founder of Corporate Knights. 

A version of this article first appeared in the Toronto Star.

^Based on analysis by Ralph Torrie, which found that deep retrofits of 80% of the housing stock will save each household $1,414 per year on home heating and power costs. Fuel savings for personal vehicles are based on the average household having 1.8 vehicles each, with annual fuel savings of $900 per car and $1230 per SUV, based on a $ /Litre and 12 cents per kwh.

*Source: IPE list of top real estate investors, with three additions: Brookfield Asset Management’s $202 billion, Sun Life SFC’s $42 billion and GWL Realty’s $28 billion in real estate assets.

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